Debt Cancellation Agreements

A Debt Cancellation Agreement, is a win-win for the customer and the finance company.

Debt cancellation agreements can be an alternative form of coverage to the finance company’s requirement for physical damage insurance on the installment contract.

Most in-house financed customers would like to have property damage insurance. Many cannot afford property damage insurance, since their credit score is used, when calculating the insurance premium, often resulting in expensive insurance costs. The customers can afford the vehicle payment, or the insurance payment, but not both many times. The customer needs their vehicle for transportation, so the vehicle payment is made first, the insurance is paid, if funds are available. Dropped insurance notices are then sent to the finance company, who contacts the customer to get the insurance reinstated or force places insurance. The insurance is again dropped after a period for nonpayment, and then the notification process starts again, creating a vicious cycle.

Debt Cancellation is not insurance, it is an amendment to the retail installment contract where the customer pays the dealership or finance company a fee and in exchange, the dealership or finance company waives the customer’s debt minus a small deductible, (depending on state law), when the vehicle is total loss or stolen and not recovered. Debt Cancellation is based on the amount financed, not on the customer’s credit score. In almost every case, it is less expensive than physical damage insurance. Debt cancellation agreements can be added to the retail installment contract, becoming part of the customer’s payment and lowering the customers total outlay to own a vehicle. The lender benefits, since no insurance tracking is required and the claim process is very easy.

States do require liability insurance on vehicles. Debt cancellation is not insurance. Customers will need to obtain liability insurance from an insurance company on the vehicle. Liability insurance is affordable.

Is debt cancellation the answer for all vehicles? No, debt cancellation waives the customer’s debt upon a total loss or theft, and does not cover partial losses such as fender benders. Debt cancellation agreements may not be the correct product for vehicles financed over long terms with higher actual cash values.

AVP has wide variety of customers across the nation using debt cancellation agreements. With this experience, we can help you decide if debt cancellation will work for you. Contact us, and we will provide you, the pro-forma and information required, for you to decide if debt cancelation agreements will work for you.